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401k Participants Pay 85% of a Typical Plan’s Costs

Payer of Fees

With regard to plan fees, participants bear the majority of 401(k) costs. Similar to any other employee benefit (e.g., health insurance), the employer determines whether the employee, employer, or both will pay for the benefit. According to Survey respondents, plan participants pay

83% of the total plan fees while employers cover 13% and the plans cover 4%.* Of the participant fees, a majority is derived from the investment holdings and the asset-based charges primarily associated within investment expense ratios (some of which may be used to cover recordkeeping and administration).

Participants pay the majority of plan fees in the form of investment expense ratios

Employers that sponsor plans with less than $10 million in assets, on average, carried a larger share of plan fees than employers sponsoring plans of $10 million or greater in assets. Plan sponsors of plans with less than $10 million in assets paid about one-third of their plans 'all-in' fees; plan sponsors with larger plan assets, on average, paid about 10% of the 'all-in' fees. This break in behavior across plan size may reflect plan sponsors’ covering the fixed costs of running the plan in the small plan space, where there are fewer participants and assets over which to spread the costs.

Payer of Fees - All Plans

Payer of 'All-In' Fees - By Percent of Plans in Asset Segment

Summary 'All-In' Fee Results

For this Survey, the 'all-in' fee was analyzed in two ways, as a percentage of plan assets and as an annual per-participant dollar amount.

The median 'all-in' fee which includes the recordkeeping, administrative and investment fees across all plans in the Study was:

• Percentage of plan assets – 0.72%; or
• Annual per-participant dollar amount – $346.

Fees of 401(k) plans vary greatly due to unique plan characteristics, plan / investment design, range and quality of services provided, and pricing strategies employed by retirement providers. As such, there are a large number of variables impacting the fees that plans and participants pay. The remaining sections of this report explore what appear to be possible drivers of this variation at a macro level (all plans) and within individual segments (micro, small, mid, large and mega-plan size markets).


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